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The primary reason why Bitcoin is in demand is because it offers many of the advantages that traditional currencies simply cannot offer.
Not so far back in late 2017, Bitcoin was all over the headlines. From the start of the year, its price went from about $900 to a mind-blowing $12,8340 – that was and still is an unprecedented rate of ROI, with many of its early investors becoming instant millionaires.
Of course, as with any inflated bubble, the value of Bitcoin did burst afterward and so did much of the interest among the general public. But you’ll still see plenty of people calling it as a viable asset and that is because, to an extent, it is.
It is important to note that the value of Bitcoin afterward only bottomed to about $3,183.5 in December 2018 and since then has more than doubled to a present amount of $6,950. Still, its wild price fluctuations and limited use as a currency may discourage some from making an investment.
If you yourself are unsure of whether to invest in the cryptocurrency or not, presented here are the pros and cons of Bitcoin trading to help you better determine the prospects.
The Pros
- Finite supply
Bitcoin’s own source code limits the number of new Bitcoins that can ever be created to exactly 21 million units. Each new coin created slows down the creation process with the rate, on average, halving every four years.
This sets it apart from traditional currencies which can theoretically have infinite supply and grant Bitcoin an intrinsic value – similar to gold and other finite commodities. This means that over time, with all other conditions being equal, the value of Bitcoin is bound to witness a general upward trend as long as demand remains for it.
- A potentially lucrative money maker
Where some people only see chaos, others see opportunity. While the high volatility in Bitcoin value puts off some traders from investing their money in it, others see it as an easy and quick way to earn a hefty income – buying when the prices are down and selling while high.
You don’t even have to be an active day trader or make use of advanced A.I trading algorithms to achieve this. If you miss one opportunity at selling or brought it at a wrong time, you are likely to net a positive return eventually.
For instance, say I bought the currency on Oct 5, 2018, when the price was $6,552.43. Immediately some time afterward, the price fell to nearly its half but by choosing to hold on to it till the mid of next year, I was able to able to make a high profit because the value appreciated by then to double my initial investment.
- Increasing liquidity
Over the years, Bitcoin has been becoming an increasingly liquefiable asset with it becoming easier and more accessible to convert its value in traditional fiat currencies. Other cryptocurrencies and digital assets still are struggling to gain acceptance and many of them cannot be exchanged with real-world money without them losing a significant portion of their value.Â
- Transactional freedom
Bitcoin transactions don’t carry with them the same level of fees and legal hurdles that encumber traditional currencies. International Bitcoin transactions are no different than local ones and fees charged tend to be generally far lower than other modes of digital payments such as credit card and PayPal.
Furthermore, because Bitcoin is a decentralised system unanswerable by any particular entity (e.g. a Central Bank), there is little or no risk of the currency being manipulated or your assets stored in it being seized.Â
The Cons
- Security issues
While a lack of regulatory compliance or legal oversight grants the currency more flexibility, it also makes it both more susceptible to scams and frauds and less likely that such activities could be prosecuted by law enforcement agencies.
Even worse is that for victims of transaction fraud, there are little hopes of getting their money back as the Bitcoin’s highly decentralised makes it virtually impossible to hold the culprit accountable.Â
- High price fluctuations
When seen as a speculative asset, short-term price fluctuations may not look too bothersome but when looked at through the lens of a currency, it becomes apparent why it’s such a major issue. Imagine saving $7000 in bitcoin only to be unable to buy something when you urgently require it because the value has suddenly decreased to $3000. Its high price volatility makes it difficult for consumers to use it as a legitimate form of exchange.Â
- Potential to become irrelevant
Perhaps the biggest downside towards Bitcoin is the real risk of it becoming irrelevant. The primary reason why Bitcoin has demand is because it offers many of the advantages that traditional currencies cannot offer but if another cryptocurrency was to offer the same or better, we could see a rapid (and permeant) decline in the value of the digital currency.
If you are interested in trading Bitcoin and other cryptocurrencies, you can open an account and start trading right away.
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